IMPORTANT INFORMATION FOR PRIVATE INVESTORS

Our investments place your capital at risk. We do not provide investment, tax or legal advice and we recommend you seek professional advice if you are considering investing with us. You may lose part or all of the amount you invest with us. We invest in unquoted shares in small companies. The value of these shares can be volatile, and the shares are often difficult to sell. The tax reliefs associated with our investments depend on the individual circumstances of each investor and may be subject to change. Past performance is not a reliable indicator of future results. Our forecasts and performance targets cannot accurately predict how investments will perform.

Recent research from accountancy firm UHY Hacker Young has put a spotlight on the need for good advice and tax-planning tools if Inheritance Tax (IHT) mitigation is sought.

The analysis revealed that there was a 5% rise in HMRC investigations into estates for underpayment of IHT last year – 5,400 estates, up from 5,100 in the 2016/17 tax year. To put this in context, one in four (24%) of the total estates liable for IHT were investigated by HMRC in the latest available year.

What’s more, if an investigation finds that IHT has been underpaid, the estate may have to pay all the tax owed plus a penalty, which could be up to 100% of the tax at stake in the estate.
Mark Giddens, a partner at UHY Hacker Young, commented, “HMRC are increasingly challenging the value of estates as investigating IHT returns becomes considerably more lucrative for raking in extra tax.” He goes on, “The rise in investigations means more beneficiaries and estates, who may not necessarily be cash-rich, could be hit with hefty fines.”

While the majority of investigations related to what HMRC judges to be undervaluation of property, it’s worth both advisers and their clients keeping a regular check on the legitimacy of all their tax planning around wealth transfer to the next generation. That planning could well include Business Relief (BR), a very efficient and effective method to mitigate up to 100% of IHT on the value of unquoted, BR-qualifying shares.

This government-introduced, established method of mitigating IHT is claimed retrospectively, meaning the confirmation of whether it is successful takes place only after the person’s death. The person must be holding the shares on death and have held them for at least two of the last five years.

The investee company must adhere to various rules during an investor’s holding period in order for its shares to be eligible for BR. Those rules include that the company must be carried on for gain and must not be subject to a contract for sale or being wound up. In addition, BR cannot be claimed if the company “wholly or mainly” deals in securities, stocks or shares, land or buildings or in the making or holding of investments. Then there is the exclusion of companies which only generate investment income such as residential or commercial property letting, property dealing and running serviced offices.

Some business activities are borderline: whether they will qualify for relief depends on the nature of services provided, typically these include, holiday businesses, property management, property development – if there is also substantial letting and dealing, and caravan parks – where there is letting, holidays and caravan sales. And this doesn’t include the rule that disqualifies companies that list on a recognised exchange (not AIM).

Therefore, it’s important to have the right advice about what to invest into and the right monitoring of the investment to ensure it doesn’t stray outside the regulations. This will likely lead to BR claims being rejected after death.

Professional fund managers specialising in BR-qualifying investments generally have an excellent record of selecting and monitoring companies to ensure that BR qualification is achieved. But, just as it’s important to be comfortable that any trust arrangements put in place for IHT purposes are structured correctly and meet the relevant regulatory requirements, it is absolutely a good idea to ask a BR investment manager about any HMRC tax investigations, or refused BR claims it has been subject to.

The Oxford Capital Estate Planning Service provides BR investments, with a track record of significant returns, the option for investors to change their strategies for access, growth and income within the product, as well as a record of approved BR claims (‘good’ or ‘successful deaths’) and no HMRC investigations.

OXFORD OFFICE

The investments referred to on this website will place your capital at risk. Oxford Capital Partners LLP’s products and funds invest in unlisted companies which are likely to be harder to value and sell than quoted shares. Please note that tax reliefs are dependent on investors’ individual circumstance and are subject to change. Where reference is made to past or future performance this should not be taken as a reliable indicator of future results. Oxford Capital Partners LLP does not provide advice and the information on this website should not be construed as such. Investors should seek advice from a regulated adviser.

At Oxford Capital we have quickly adjusted to the ‘new normal’ of working within the restrictions of Covid-19. All of our team are working effectively from home, and our operations are carrying on as normal. The health and wellbeing of our colleagues and their loved ones remains paramount and we are focused not only on maintaining business as usual but on keeping morale high in an environment of much less social interaction. We recently welcomed our first remote new hire and our team has rallied in supporting her induction. We recognise the challenges of juggling home and work life at the moment, and are touched by the positive attitude and adaptability with which everyone has responded. The technology of Teams, Skype and Zoom has become routine for daily interactions both inside and outside the firm, and we are communicating with clients, founders and business partners as usual. We have also enjoyed getting to know better the children, partners and pets of our colleagues and friends, bringing moments of laughter, joy and humanity.

Clients’ investments are being managed as normal by our investment team. We continue to attend portfolio board meetings and other meetings as usual, albeit remotely. Many of the usual business events and conferences that we are used to participating in are being hosted online and we participate and contribute as normally as we can.

It is important during times of such uncertainty to remember that investing in small private companies is a long-term activity. We seek to guide and support our founders and portfolio companies through their respective challenges, drawing on our own experience of past crises and on good teamwork. Following an intense period of working with our portfolio companies to assess the impact of Covid-19, we have supported action where required to take early measures to reduce costs and extend cash runways. Much of our thinking is now turned to the positioning of companies for long term opportunities as the market takes a leap forwards in accelerating digital transformation in many sectors of the economy, often building on trends that pre-existed the crisis. Many of the companies in the portfolio have demonstrated their commitment to social responsibility by supporting the NHS and key workers, governments and supporting their own staff and families. We support these efforts simply as they are the right thing to do.

At Oxford Capital we continue as normal whilst anticipating the next “new normal”. No employees have been furloughed. We are fortunate to work in a business which is willing to help others. We do our best to support each other and our loved ones, just as we endeavour to support our investee companies. We salute Captain Tom for his extraordinary fund raising efforts. We also recognise the efforts of our portfolio companies and so many entrepreneurs as they navigate the Covid-19 challenges. We hope that these efforts will contribute to the success of our nation’s economic revival and to value for our investor-clients.